SAC forfeiture case delayed as firm raises bonuses

Bloomberg News

Published 9:32 pm, Wednesday, September 4, 2013

SAC Capital Advisors, the hedge fund firm that is facing federal insider-trading charges and a money laundering lawsuit, is raising 2014 bonuses for its portfolio managers by 3.5 percentage points to help retain employees, a person with knowledge of the decision.

The increase, announced to employees in meetings Wednesday, will be paid to equity, macroeconomic and quantitative-trading portfolio managers, said the person, who asked not to be identified because the discussions are private.

Portfolio managers at Stamford-based SAC are typically paid an annual bonus of 15 percent to 25 percent of the profits they generate from their investments.

SAC founder Steven A. Cohen last month sought to reassure employees that business will continue as usual after U.S. prosecutors indicted the 21-year-old firm and raised the prospect that its assets may be subject to forfeiture.

Many of SAC's employees have contacted friends, hedge funds and recruiters in a bid to land jobs next year when they expect the firm will need far fewer employees, people who have spoken to them said last month.

SAC told employees Wednesday that it will guarantee a minimum compensation of $300,000 for its equity analysts for next year, the person said. A spokesman for SAC declined to comment.

Cohen had raised bonuses for this year as the government's insider-trading probe intensified following the November arrest of Mathew Martoma, a former SAC portfolio manager.

Equity, macro and commodity portfolio managers received an increase of 3 percentage points, a person with knowledge of the plan said in January. SAC has about 1,000 employees working out of offices from New York to Hong Kong. While the firm doesn't disclose portfolio managers' pay, it said in a July 22 report that "numerous" portfolio managers have earned more than the $9.3 million bonus made in 2008 by Martoma.

SAC was accused by the U.S. in a July 25 indictment of engaging in an unprecedented insider-trading scheme lasting more than a decade. The same month, regulators in an administrative action said Cohen failed to supervise Martoma and SAC fund manager Michael Steinberg.

In another matter, the exchange of evidence in the government's forfeiture lawsuit against SAC Capital was delayed by a judge until Jan. 6, 2014 while the government pursues insider trading prosecutions tied to the hedge fund.

A postponement of the case is warranted until insider trading prosecutions of the company, as well as Steinberg and Martoma, are concluded, Assistant U.S. Attorney Micah Smith told U.S. District Judge Richard Sullivan Wednesday in Manhattan federal court. Steinberg and Martoma face separate trials in November.

A federal grand jury in July indicted Cohen. The government also filed a related money laundering lawsuit seeking forfeiture of ill-gotten gains. The delay of civil cases while related prosecutions proceed is a standard government request.

"Our concern is the defendants would request to depose government witnesses who may not yet have testified at trial," Smith said, adding that the stay could be in place until after the Martoma and Steinberg trials are concluded.

Manhattan U.S. Attorney Preet Bharara, who called SAC "a veritable magnet for market cheaters," said the hedge fund reaped hundreds of millions of dollars in illicit profits through separate insider-trading schemes by at least eight former SAC fund managers and analysts. Cohen has denied any wrongdoing.

Michael Schachter, a lawyer for the hedge fund, said Wednesday that the defendants didn't oppose the request for a stay. He said that the government had already produced "multiple terrabytes" of information.

The judge granted the request saying that by Jan. 6 he expected to receive a letter from the parties about the status of the SAC criminal cases as well as if lawyers in this case believed discovery could begin.